LDV is expected to start paying its cash-strapped employees again this week after withdrawing its application for administration.

The Washwood Heath vanmaker is set to resume production in July after its Russian owner, Gaz, sold the business to Malaysian group Weststar for an undisclosed sum at the weekend.

The good news, however, was offset by a warning that up to 20 per cent of the workforce could face redundancy because of reduced production volumes.

The Weststar deal, which is still subject to due diligence, has triggered government aid in the form of a bridging loan that will allow LDV to pay some overheads, including wages.

Some of the company’s 850 employees have begun trickling back to work to begin preparing the factory for a resumption of production. The plant has been mothballed since last December after the recession and combined credit squeeze took a severe toll on sales of its award-winning Maxus range of vans, mini buses and light trucks. Money is expected to go into workers’ bank accounts this week, the company said.

Announcing that LDV Group and its associated company, Birmingham Pressings, had formally withdrawn its application for administration at Birmingham County Court yesterday afternoon, chief executive Evgeniy Vereshchagin said: “This is due to the facts that Weststar have publicly confirmed their intention to acquire LDV ... and a loan process has been put in place with government assistance to enable the sale process to be completed.

“The bridging loan enables LDV to pay the minimum amount of forward overheads, including employee payments, to maintain the business as a going concern with the workforce intact.

“As has been stated previously, the sale of the business as a going concern to Weststar is in the best interests of LDV employees, suppliers, dealers, business partners and the UK economy.

“Today was an essential step towards the completion of a deal to secure an exciting future for LDV, as part of a new global business as outlined in the press release by Weststar. This sends a positive message about the potential future available to LDV and its business partners. This is not, however, the completion of the process and whilst a sale agreement has been signed, due diligence has to be completed before the sale can be finalised. LDV requires the full support of all its creditors and employees to complete the sale process, restart production and launch exciting new products such as the Electric Maxus into the market as soon as possible.

“We appreciate the last few months have been exceptionally difficult for many of our employees and valued business partners, however we are more confident than ever that supporting this process will ensure the best outcome in the long term for everyone.”

LDV has warned that redundancies were likely under Weststar’s ownership as production is reduced to match slack demand. Writing on the company’s website, Martin Donegan, the Unite union representative at the Drews Lane site, said that, under the failed buy-out plan launched by LDV executives, production would have been cut to 200 vehicles a week. “If Weststar were to take the same option then the workforce would have to be reduced by at least 20 per cent as current manning levels are set at 247 vehicles per week,” Mr Donegan said. A reduction of that size could result in the loss of up to 170 jobs at the factory.

Spokesman Guy Jones, the company’s marketing and PR manager, said Weststar had not yet drawn up a production plan and he could neither confirm nor deny Mr Donegan’s estimate.